OREANDA-NEWS. May 20, 2016. Fitch Ratings has assigned a 'BBB+' rating to Manulife Financial Corporation's (MFC) SGD500 million 3.85% fixed/floating rate subordinated notes due 2026. The subordinated debt issuance occurred in Singapore and is expected to close on May 25, 2016.

KEY RATING DRIVERS

Under Fitch's notching methodology, a baseline recovery assumption of Poor was used. Notching of two down was applied relative to the holding company's Long-Term Issuer Default Rating (IDR) of 'A'.

Proceeds from the issuance will be used for general corporate purposes. Fitch expects pro forma financial leverage following the subordinated note issuance to increase to 21.9% from 21.2% at March 31, 2016.

Fitch affirmed the ratings of MFC and its insurance operating subsidiaries with a Stable Outlook on Jan. 26, 2016.

RATING SENSITIVITIES

Key rating triggers for MFC that could lead to a downgrade include:
--Decline in core earnings;
--Elevated charges for actuarial methods and assumptions or experience losses;
--Fixed-charge coverage on a core earnings basis below 6x;
--An increase in financial leverage to over 25% or an increase in total leverage to over 35%;
--A sustained drop in MFC's risk-adjusted capital position with no plans or ability to rectify. This would include the minimum continuing capital and surplus requirement ratio falling below 200%. The ratings on the U.S. insurance subsidiaries could be impacted if the U.S. risk-based capital ratio fell below 400%;
--Large acquisitions that are outside the company's historical risk preference or that have a material impact on the company's leverage and capitalization.

Key ratings triggers for MFC that could lead to an upgrade include:

--Improvement in return on equity based on core earnings to 12% or higher;
--Stability in reported net income;
--An increase in fixed-charge coverage on a core earnings basis to over 10x;
--Maintaining current capital and earnings sensitivity to interest rate and equity markets;
--Continued maintenance of financial leverage at or below 20%.

FULL LIST OF RATING ACTIONS

Fitch has assigned the following rating:

Manulife Financial Corporation
--SGD500 million 3.85% fixed/floating subordinated notes due 2026 'BBB+'.

Fitch currently rates the MFC entities as follows:

Manulife Financial Corporation
--Long-Term IDR 'A';
--CAD400 million medium-term notes 5.505% due 2018 'A-';
--CAD600 million medium-term notes 7.768% due 2019 'A-';
--USD500 million senior notes 4.90% due 2020 'A-';
--USD1.0 billion senior notes 4.15% due 2026 'A-';
--USD750 million senior notes 5.375% due 2046 'A-';
--CAD350 million 4.65% non-cumulative class A, series 2, preferred stock 'BBB-';
--CAD300 million 4.50% non-cumulative class A, series 3, preferred stock 'BBB-';
--CAD200 million 4.20% non-cumulative rate reset, preferred class 1, series 3 stock 'BBB-';
--CAD200 million 4.40% non-cumulative rate reset, preferred class 1, series 5 stock 'BBB-';
--CAD250 million 4.60% non-cumulative rate reset, preferred class 1, series 7 stock 'BBB-';
--CAD250 million 4.40% non-cumulative rate reset, preferred class 1, series 9 stock 'BBB-';
--CAD200 million 4% non-cumulative rate reset, preferred class 1, series 11 stock 'BBB-';
--CAD200 million 3.8% non-cumulative rate reset, preferred class 1, series 13 stock 'BBB-';
--CAD200 million 3.9% non-cumulative rate reset, preferred class 1, series 15 stock 'BBB-';
--CAD350 million 3.9% non-cumulative rate reset, preferred class 1, series 17 stock 'BBB-';
--CAD250 million 3.8% non-cumulative rate reset, preferred class 1, series 19 stock 'BBB-';
--CAD400 million 5.6% non-cumulative rate reset, preferred class 1, series 21 stock 'BBB-'.

The Manufacturers Life Insurance Company
--Insurer Financial Strength Rating (IFS) 'AA-';
--Long-Term IDR 'A+';
--CAD550 million 4.21% fixed/floating subordinated debentures due 2021 (Manulife Financial Corp. guarantor) 'A';
--CAD500 million 4.165% fixed/floating subordinated debentures due 2022 (Manulife Financial Corp. guarantor) 'A';
--CAD200 million 2.819% fixed/floating subordinated debentures due 2023 (Manulife Financial Corp. guarantor) 'A';
--CAD250 million 2.926% fixed/floating subordinated debentures due 2023 (Manulife Financial Corp. guarantor) 'A';
--CAD500 million 2.811% fixed/floating subordinated debentures due 2024 (Manulife Financial Corp. guarantor) 'A';
--CAD500 million 2.64% fixed/floating subordinated debentures due 2025 (Manulife Financial Corp. guarantor) 'A';
--CAD750 million 2.1% fixed/floating subordinated debentures due 2025 (Manulife Financial Corp. guarantor) 'A';
--CAD350 million 2.389% fixed/floating subordinated debentures due 2026 (Manulife Financial Corp. guarantor) 'A';
--CAD1 billion 3.181% fixed/floating subordinated debentures due 2027 (Manulife Financial Corp. guarantor) 'A'.

The Manufacturers Investment Corporation
--Long-Term IDR 'A';
--Short-term IDR 'F1';
--Commercial Paper 'F1'.

Manulife Finance, L.P.
--CAD550 million 4.448% fixed/floating rate senior debentures due 2026 (Manulife Financial Corp. guarantor) 'A-';
--CAD650 million 5.059% fixed/floating rate subordinated debentures due 2041 (Manulife Financial Corp. guarantor) 'BBB+'.

Manulife Financial Capital Trust II
--CAD1 billion 7.405% MaCS II series 1 'A-'.

John Hancock Life Insurance Co (U.S.A.)
--IFS 'AA-';
--IDR 'A+';
--USD450 million surplus notes 7.375% due 2024 'A'.

The John Hancock Life Insurance Company of New York
--IFS 'AA-'.

John Hancock Life & Health Insurance Company
--IFS 'AA-'.